Hilton Colombo profits drop, plans for high market revenues 2015/16
View(s):Hilton Colombo has been experiencing a sharp dip in profits by 63 per cent owing to the US$35 million refurbishment drive that caused a shutdown of some of the hotel’s rooms resulting in low occupancies.
The drop in occupancy due to the decision taken to close the hotel in December 2013, which also resulted in the airline crews moving out to competitor hotels resulted in a drop in occupancy of around 15-20 per cent, the Hilton Hotel management said in releasing its financial results for 2013/14.
As a result profit after tax declined from Rs.689 million in 2012/13 to Rs.192 million in the latest year, the results said. Earnings per share had dropped to 16 cents from Rs.15.24 in 2012/13. In addition, the total revenue had dropped to Rs.2.5 billion from Rs.3.1 billion.
The $35 million refurbishment programme would provide contemporary luxury that was expected to contribute significantly to the projected revenue in 2015/16 as well as the value addition gained from partnering with the global Hilton loyalty programme H Honours.The total cost of refurbishment was sourced through a syndicated bank loan and the balance from the internally generated resources of the company. The refurbishment would introduce new amenities and modernisation of current facilities with design and layouts increasing room key for suites, meeting rooms and banquet facilities, gym and spa facilities in line with the Hilton international brand standards.
Hilton Colombo Chairman T. Nadesan in the annual report attributed the hotel’s drop in profits to the “significant achievement of repaying a loan of Rs.1 billion.”
He noted that “this is the first time this company has been able to repay a significant slice of its liabilities and we are confident, that in the next few years, our strategy would be fruitful for us to turn in a clean balance sheet.”The company’s total operating costs that stood at Rs. 2,392 million in 2012/13 financial year was down to Rs. 2,280 million with the reduction in occupancy.
The company’s long term finance costs declined from Rs. 347 million in the previous financial year to Rs. 251 million resulting in a saving of Rs. 96 million. This significant reduction was due to the government loan repayment of Rs. 1 billion in June 2013 and the conversion of the balance loan outstanding as at December 31, 2013 into equity.
The current year saw the company’s net asset value reach Rs. 13 billion with the conversion of the balance loan into equity reflecting an improvement of 23 per cent against the previous year. Cash surplus in financial assets remain unchanged at Rs. 2.2 billion during the year under review.
The Hilton Colombo plans to become a high end tourism product on par with the international image of the Hilton brand. In this regard, the hotel has a mix of employees numbering nearly 700 from all parts of the country and also due to its advantage of having access to multiple nationalities from Hilton Worldwide they also employ two expatriate chefs from the UK and India.